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Cross Timbers concentrating on gas, not interested in North Slope properties Focus in Alaska on Middle Ground Shoal, although paying off Lower 48 debt could put inlet on back burner Allen Baker PNA Contributing Writer
While Cross Timbers Oil Co. put $10,000 into the campaign favoring the use of permanent fund earnings for state government, the company that bought Shell’s platforms in Cook Inlet isn’t likely to step into the bidding for North Slope properties available in the wake of the BP Amoco-ARCO merger.
Fort Worth, Tex.-based Cross Timbers is leaning heavily on the gas side now.
Concentrating on Middle Ground Shoal “Our current focus in Alaska is on the Middle Ground Shoal Field,” said Cross Timbers treasurer John O’Rear, when asked if Cross Timbers might step into the bidding for leases or producing properties being shed by BP Amoco. “We are not currently looking at other transactions in the area.”
Cross Timbers has been busy recently in the Lower 48, boosting its gas reserves with two major acquisitions in the Arkansas-Oklahoma area.
In early August, Cross Timbers bought Arkoma Basin gas properties from Ocean Energy Inc. for $235 million, in a partnership with Lehman Brothers Holdings Inc. Cross Timbers got 1,140 producing wells from Ocean Energy, which is also selling Enstar Natural Gas Co. and Alaska Pipeline Co. after swallowing Seagull Energy.
1,400 producing gas wells The Arkoma purchase followed an $85 million deal in May, also in partnership with Lehman Brothers, in which Cross Timbers bought Spring Holding Co. That purchase brought interests in about 1,400 producing gas wells in the same basin.
Both deals give Lehman Brothers 50 percent of the operations, with Cross Timbers receiving an option to purchase that share later.
Together, the two transactions add 480 billion cubic feet of gas equivalent to company reserves, with current daily production of 122 million cubic feet, according to the company.
The deals put Cross Timbers firmly in the gas business, according to spokesman Preston Kirk, with natural gas providing 90 percent of revenues.
With proved reserves expected to exceed 2 trillion cubic feet of gas equivalents by the end of the year, Cross Timbers expects to break into the top 10 independent gas producers, according to company president Steve Palko.
Quick to shift emphasis, as needed With low oil prices over the winter, Cross Timbers shifted its emphasis to gas, which is a little more stable, Kirk said.
“Traditionally, Cross Timbers has been very quick to move from the oil side to the gas side as the economics dictate,” he said.
In Cook Inlet, Cross Timbers is expanding waterflood on the west flank of the mature field, according to treasurer O’Rear, while doing some study modifications on waterflood improvement. The properties are producing about 3,600 barrels of oil a day from 31 producing wells, with reserves estimated at 12 million barrels.
“Obviously, with price improvements in oil, we are more excited. But first we must complete our studies,” O’Rear said. The company is considering future drilling in the inlet, along with other efficiency improvements in the field that began producing oil in 1966.
More than a thousand drilling opportunities But with the new gas field acquisitions and prior purchases in the San Juan Basin and East Texas, Cross Timbers has more than a thousand drilling opportunities, Kirk said. Development spending is pegged at $100 million to $120 million next year, according to its recent statement of strategic goals, with excess cash flow aimed at reducing debt or buying other properties.
Cross Timbers is hoping to cut debt by $300 million by the end of this year, to $630 million, according to Kirk. As part of that effort, the company recently announced plans for a royalty trust for its Permian Basin properties in West Texas and New Mexico, with 25 million units. The company expects to sell 10 million of those units in October to reduce bank debt.
With the need to pay down debt and Cross Timbers’ recent emphasis on natural gas, Cook Inlet development could end up on the back burner for a while.
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